Chapter 3

1. Chapter 3 Managing in a Global Environment

2. The International Business Environment • Greater difficulties and risks when performing management functions - due to differences in culture, language, economies, laws, political stability, etc.

3. Stages of Globalization 1. Domestic Stage = All production and marketing facilities at home. 2. International Stage = International Division is typically part of the structure, but is not dominant. 3. Multinational Stage = Marketing and production in many countries and 1/3 of sales from outside home country. 4. Global Stage = Not identified with any single country, look for opportunities most anywhere.

4. Multinational/Global Corporations • The revenue of GM is comparable to the gross domestic product (GDP) of Finland • Revenue of General Electric is equal to the GDP of Israel • Revenue of Toyota is similar to the GDP of Hong Kong.

5. are criticized for: Excessive profits Lack of technology transfer Lack of respect for local culture Interference with governments complain about host countries: Profit limitations Overpriced resources Foreign exchange restrictions Failure to meet contract obligations Multinational/Global Corporations

6. GATTGeneral Agreement on Tariffs and Trade • For settling international trade disputes • Most Favored Nation (MFN) = members grant each other most favorable trade treatment (reduced tariffs, etc.) • GATT has changed to WTO (World Trade Org.) (144 members in 2002)

7. European Community (EC) • Formed in 1958 to improve economic and social conditions among its members • 15 nation alliance is an open market for Europe's 340 million consumers. • Moving toward one economy and one currency

8. Auto sales Telecommunications Social policy Monetary union Banking Insurance Health Safety standards Airlines EC Reforms and Deregulation

9. Advantages of the EC • Increased competition and economies of scale will enable companies to grow large and efficient • Will become more competitive in the United States and other world markets.

10. North American Free Trade Agreement (NAFTA) 1994 • Canada, Mexico, and U.S. • Alliance of 360 million consumers • Expected to spur growth and investment, increase exports, and expand jobs in all three nations

11. Opposition to NAFTA • Many opposed the agreement due to fear of job losses to Mexico • Others fear weakened pollution standards and toxic dumping.

12. Some NAFTA Effects • Cifra in a joint venture with Wal-Mart to operate Wal-Marts and Sam’s Clubs in 20 Mexican cities • Cinemark Theaters building movie multiplexes in several large Mexican cities • Mexican investors buy Del Monte foods

13. Alliances-Promise or Pitfall? • Will there emerge multiple competitive trading blocs? • Will just three powerful trading blocs dominate: Americas, Europe, Pacific Rim (APEC - Asian-Pacific Economic Forum)? • Will the expansion of global corporations weaken the trading blocs?

14. Hofstede’s Dimensions of Culture • Power Distance • Uncertainty Avoidance • Individualism/Collectivism • Masculinity/Femininity • (Time Orientation)

15. Power Distance • High power distance means people accept inequality in power among institutions, organizations, and people

16. Uncertainty Avoidance • High uncertainty avoidance means that members of a society feel uncomfortable with uncertainty and ambiguity

17. Individualism & Collectivism • Individualism reflects a value for a loosely knit social framework in which individuals are expected to take care of themselves • Collectivism is a preference for a tightly knit social framework in which individuals look after one another

18. Masculinity/Femininity (Toughness/Tenderness) • Masculine cultures stress the importance of achievement, heroism, assertiveness, and material success • Feminine cultures value relationships, modesty, caring for the weak, and quality of life

19. Time Orientation • Short-Term Orientation means that people expect fairly rapid feedback from decisions, expect quick profits, frequent job evaluations and promotions, etc.

20. NAFTA Countries’ Cultures • U.S. and Canada virtually identical on Power Dist. & Uncert. Avoid. U.S. a little higher on Individualism & Masculinity. • Mexico lower than U.S. and Canada on Individualism and higher on the other 3. • With the exception of Masculinity, Mexico is more similar to France than its NAFTA partners.

21. Other Cultural Characteristics • Language • Religion • Space • Time Orientation (monochronic vs. polychronic)

22. Managing Cross-Culturally • Must be culturally flexible and easily adapt to new situations and ways of doing things • Cannot be ethnocentric • Culture Shock = frustration and anxiety from different culture • Motivating - Must fit the incentives with the culture • Controlling- Often are unable to fire unproductive employees and must find creative ways of dealing with them.

23. Positive: Informal, frank, trustworthy Innovative, open-minded, pragmatic Entrepreneurial, profit-oriented Eager to get things done Work harder than Europeans Negative: Work less hard than Asians Short-term orientation Judge person’s worth by their wealth Loyal to unit, not firm Not well-rounded educationally Parochial Characteristics of U.S. Managers as viewed by other Nations

24. Global Outsourcing (e.g., Nike) Exporting (e.g., L.L. Bean) Licensing (e.g., Lowenbrau) Franchising (e.g., McDonald’s) Direct Investing Joint Venture (e.g., NUMMI) Wholly Owned Foreign Affiliates Acquisition (e.g.,BP purchasing AMOCO) Greenfield Venture (e.g., Toyota in Kentucky) Getting Started Internationally